Canada’s Finance Minister Chrystia Freeland said about one-fifth of the 900,000 small and medium-sized businesses that received interest-free loans to weather government civil rights violations during the Wuhan coronavirus pandemic have yet to repay their loans. He said he had not.
The Canadian Federation of Independent Business (CFIB) paints an even grimmer picture, estimating that 25 per cent of borrowers missed the January deadline.
More than 200,000 small businesses may not be able to repay emergency loans in Canada in 2023 as pandemic funding dries up and bankruptcies begin to surge, boding badly for 2024.
CFIB and Treasury of Canada guaranteed Reuters said on Thursday that large small and medium-sized business failures were not expected, even those that missed repayment deadlines on pandemic loans. Optimism is that these borrowers will enroll in long-term repayment programs that charge 5% interest over the next two years, but the downturn in the Canadian economy may put an end to some shaky business models. There are also signs that it may be hit.
“We expect the number of bankruptcies to increase over the next six months or so,” Stephen Tapp, chief economist at the Chamber of Commerce, said in an interview.
The Conference Board of Canada (CBC), an independent think tank, predicts that per capita consumer spending in 2024 will fall further from levels already seen last year.
CBC expects first-quarter corporate profits to be nearly half that of a year ago at C$104.5 billion, with the remaining companies also hit by higher costs and lower sales, expected to be lower than in 2023. .
BNN Bloomberg warned In mid-January, it was announced that many of Canada’s troubled small businesses would throw in the towel instead of accumulating interest on balances they can’t pay by the Jan. 18 deadline to settle pandemic emergency loans. The deadline has already been postponed multiple times because business organizations say it is too difficult to meet it.
Those who are late on their payments will have to pay 5% interest on the extended repayment plan, as well as the $20,000 provided by the government for faster repayment of Canada Emergency Business Account (CEBA) loans. They also lost their loan forgiveness.
Some small and medium-sized business owners told BNN that they don’t understand the logic of continuing to operate with fewer customers and tighter profit margins. Because the government shut down during the period, they now face the obligation to repay the loans they originally needed. Wuhan coronavirus pandemic.
Another problem facing Canada’s struggling small and medium-sized businesses is that if they don’t repay their CEBA loans, commercial banks deem them low risk and refuse to lend them further. Therefore, if the CEBA deadline is extended to 2025, as many have requested, troubled companies may find it difficult to survive for another year.
of vancouver sun talked More owners say their CEBA loans to get them through the pandemic lockdown may be causing them to shut down now that the pandemic is over, inflation and costs are rising and business is down. In the meantime.
“There are probably, I don’t know how many, restaurants that are going to close because they don’t have the money. This is the worst time in January to ask businesses, whether they’re restaurants or retailers, to pay back a little bit of money.” said Ian Tostenson, CEO of the BC Restaurant and Foodservice Association.
Tostenson said Canadian restaurants typically rely on revenue from the busy December holiday season to get through the slow season at the beginning of the year and use the money to repay CEBA loans, especially after 2023. , pointed out that there is a possibility that the company could fall into a business crisis. The holiday season was marked by customer frugality and disappointing returns.
Industry group Restaurants Canada estimates that more than half of Canadian restaurants are now operating at break-even or in the red, leading to an unsuccessful plea to the government to defer repayments on pandemic loans for another year. This is the reason. Because the loan program totaled more than $49 billion, the Canadian government said extending the repayment schedule with additional interest was the only way to delay repayments further.
